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Bank of China Issued Report for Q4 2015 Economic and Financial Outlook


2015-10-30

On September 23, 2015, Bank of China issued its report for Q4 2015 Economic and Financial Outlook (hereinafter referred to as the “report”). In this report, there is an outlook for the global and China’s economic and financial situation and the world banking industry in Q4, based on the review of Q3 2015. Meanwhile, some hot issues are analyzed in the report.

Global Economic and Financial Outlook: In the first three quarters of 2015, developed economies witnessed steady recovery, economic growth in emerging economies continued to slow down, and such countries as Russia and Brazil sunk into a deep recession. The situation is severe. Sharp currency depreciation in emerging countries, drastic volatility of stock markets and continuous depression of commodity prices have exacerbated the volatility of global financial market and aggravated systematic financial risk. In the last quarter of 2015, it is forecast that global economy will sustain weak recovery, risks that financial market faces will not decrease, and Fed’s rate hike is imminent, which will further lead to spillover effect worldwide. This report focuses on the new uncertainties in Fed’s rate hike, economic situation in Europe and the impact of financial turmoil in emerging markets, downward pressure on commodity prices and changes in RMB exchange rates.

China's Economic and Financial Outlook: In Q3, against international financial market rollercoaster and impotent global economic recovery, China faced increased economic downward pressure due to multiple factors. Growth of main indicators like investment, export and industry slowed down. Under the sharp reshuffle of the stock market, the financial industry also decelerated markedly, and the Q3 GDP is expected to grow by around 6.8% and CPI around 1.9%. Looking into Q4, we expect the growth-stabilizing policies to continue showing effects, and constraints from “people” and “money” on investment to gradually ease. With a low base, economic growth in Q4 is expected to stabilize, with potential GDP growth rate edging up from Q3 to around 7%. The yearly GDP may grow by about 7%. In the medium and long-run, China is in a critical period featuring switchover of growth engines, restructuring, phase shift and risk mitigation, when new growth engines are being nurtured but still in small scale and traditional engines are adjusting and fading. China’s economy is expected to run at the bottom of the business cycle for a while. In the crucial period of switchover of growth engines, it is important to keep loose policy so as to gain time for growth of new engines and economic restructuring, especially for growth stabilization and risk prevention. Neither the general direction of deepening reform nor the short-term underpinning policy should be changed.

Global Banking Industry Outlook: In the first half of 2015, Global Systemically Important Banks (G-SIBs) saw steady expansion of asset size, slower growth of profit and improved asset quality. The banking industry was firm in the US and UK, remained weak in Japan, and was faced with significant uncertainty in the Euro Zone. While balance sheet grew steadily in China’s banking industry, the profit slowed down rapidly and non-performing loans continued to rise in both amount and ratio with more pressure on loan loss coverage provisions, so upholding prudent operation is especially important.

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